BERLIN — Hotel executives say leisure travel to Europe continues to remain hot, and developers and investors are most interested in coasts and mountains.
During the "Leisure Makers" session at the 2024 International Hospitality Investment Forum, IHG Hotels & Resorts Vice President of Development for Europe Willemijn Geels said the Balkans along with Spain, Portugal, Italy and Greece continue to be hot spots.
"That's where we see a lot of growth, and we kind of follow where our investment partners go within Europe," she said. "We have eight priority markets and follow the capital."
But she said there is life for investment "beyond the beach."
"We'll do urban locations. We can do countryside locations," Geels said.
Omer Isvan, president of Servotel, said for investors from around the globe "the geography is expanding."
"It's obviously France, Italy, Spain, Portugal and Turkey — these are kind of the obvious and most risk-mitigated types of areas, but we're seeing much more off-grid and new destinations," he said. "There's a technique and science behind how to approach those, and that's what's exciting us. Creating an experience in Saint-Tropez is not easy. Saint-Tropez is its own experience, so what are you going to add?"
He said more investors are growing comfortable with those types of destinations, but it's still not palatable for more risk-adverse institutional investment groups.
"If you say, 'I'm going to build a resort in the middle of the Namibian desert,' the institutionals are not going to be super excited at the moment," Isvan said. "I'm generalizing, but that's more the realm of private equity, family offices and things like that."
Francisco Moser, CEO of hospitality for Arrow Global Portugal, said even in the beach destinations with the highest demand, some investors still have to grapple with the reality of seasonality.
"The biggest challenge is to make a 12-month resort, all year round," he said. "Having a hotel on a beachfront is not enough because it only works for three or four months maximum, so we have to try to integrate the maximum number of amenities possible."
Those types of resorts, though, have seen a boost from more remote work in the wake of the COVID-19 pandemic, Moser said.
"People are looking for new experiences," he said. "The new generations want a totally different type of life. We have to think about that from the consumer side."
But there's opportunity for investors who are smart about the seasonality of resorts, Isvan said.
"Seasonality is not an enemy," he said. "It's whether you can create a feasible product which is seasonal and call it that. Don't actually try to change its dynamics and change its DNA and mutate it so you can extend the season beyond its natural habitat. We have serious examples of a 95-day-a-year operating hotel which was developed at €2 million ($2.2 million) a key with a great return on investment."
Part of stretching seasonality is less about hoteliers forcing the issue and more about travelers changing behaviors, Geels said.
"I think it is getting longer because people travel at different times," she said. "Customer demand is shifting, and people travel to different destinations and stay longer."
Yuan Fang, senior vice president of development for Europe and the Americas at Thailand-based Minor International, said shifts in demographics have been a key driver in how her company has sought to reposition some of its aging assets — particularly those in Portugal.
"If you want to keep the same base of clients who have been loyal to you for the last two years — and there's nothing wrong with wanting to keep the same operation and same clientele — but it's about thinking what do we want to drive the guest experience and give the maximum return to the asset," she said. "So if you really want to go to a different segment, normally when you do a repositioning you want to go higher or keep the same."
Geels said IHG sees growth opportunities in leisure-driven markets across different segments, from its luxury brands such as Six Senses to midscale with Holiday Inn Express.
The right brand for a project comes back to the specifics of the destination and the project, she said.
"I would separate between what you call a resort, which for me is kind of a hotel with all the integrated facilities and clients stay on-site most of the time versus a hotel in a leisure-oriented destination, which can very well be a very successful Holiday Inn Express in France," Geels said.